Lately, many investors have been coming to me with the same two worries. Here is how those talks usually go.
Worry 1: “My SIP gave no profit in two years. Is something wrong?”
Investor: I have invested every month for two years. I still have about what I put in. My friend’s FD earned money. Did I make a mistake?
Me: No. Equity is like planting a mango tree. For the first few years, you water it and see no fruit. That doesn’t mean the tree is dead. It means it is still growing roots.
Investor: But I chose a good fund. Shouldn’t it have protected me?
Me: A good fund is like a good driver. He improves your chances, but he cannot stop the traffic or the rain. Even top-rated funds had many investors sitting at zero profit after one year.
Investor: Has this happened before?
Me: Yes. Someone who started an SIP in 2010 saw almost nothing after two years, while debt funds were doing well. Many people stopped. Those who continued saw their SIP grow at more than 14% a year over seven years, well ahead of debt.
Investor: So why is the market flat now?
Me: Think of a big mall where the crowd rushes to one shop because of a sale. Global investors rushed to a few AI companies abroad, so other shops, including India, saw fewer visitors for a while. Our businesses kept earning more. Indian investors like you kept investing too. Nothing is wrong with your fund. The crowd just went elsewhere.
Investor: But it still feels like my money is doing nothing.
Me: Think of buying vegetables. When tomatoes are cheap, you get more for the same ₹100. An SIP works the same way. When prices fall, your fixed monthly amount buys more units. So a flat period is when you collect the most units. When the market recovers, all those extra units rise together. Today’s low price is your SIP’s discount sale.
Investor: So what should I do?
Me:Keep your SIP going. Don’t stop in the middle.
Don’t put money you need in the next three years into equity. Wedding or school fees money should not sit in a market that can stay flat.
Compare your fund with similar funds, not with an FD or debt fund over two years. That is like comparing a cricketer’s Test and T20 records.
Don’t chase whatever gave the highest return last year.
Investor: Okay. But what if the market is fine and my fund is just a weak one?
Worry 2: “My fund is lagging. Must I sell it?”
Me: My rule is simple: sell a fund for a reason, not for a number.
Investor: But the number shows it is behind others.
Me: Think of a student who ranked low in one exam. Do you change the child’s school? You first find out why. Maybe the paper was tough, maybe he was unwell, or maybe he really isn’t studying. Fund ranks change a lot too. Over many years, funds at the bottom often climbed up, and many toppers fell back. Fewer than three in ten toppers stayed on top.
Investor: So how do I find out why?
Me: There are three reasons a fund goes weak:
The fund’s style is out of fashion. Like a batsman who plays slowly and steadily, while the pitch currently suits big hitters. The player hasn’t changed. Be patient.
The fund has changed. The captain left and a new one is taking different decisions, or the team has stopped playing the way it promised. Time to leave.
The fund was never good. It looked great only because the whole market was rising, like everyone looking clever during a boom. Time to leave.
Investor: But all three look the same on my statement.
Me: Yes, that’s the trap. The number tells you something is off, but not why. Find the reason first.
Investor: And if I sell, can I just switch?
Me: Switching costs money. Selling with profit means you pay tax, so the new fund must first earn back that tax before you are ahead. It is like changing your house for a slightly better one, but paying brokerage and shifting charges. Unless the new house is clearly better, it isn’t worth the move.
Investor: So what is the process?
Me:Check the fund against similar funds over three and five years. Not against the best fund of the month.
Ask which of the three reasons fits. Look at the manager and whether the fund still invests as promised.
If nothing has changed, give it more time.
If you are unsure, stop adding new money for now, but don’t rush to sell.
If it truly needs to go, switch to a similar type of fund. Consider selling across two financial years to save tax.
Investor: That’s calmer than I expected. I thought lagging meant leaving.
Investor: So a flat SIP is like a tree growing roots, and a low rank is like one bad exam.
Me: Exactly. Don’t uproot the tree after two seasons, and don’t change the school after one result. Find out the reason first, then decide.
